What is ‘Undercast’
A forecasting error that occurs when estimating items such as future cash flows, performance levels or production. Undercasting produces an estimation that is below the realized value.
Explaining ‘Undercast’
There are a number of factors that may lead to undercasting values. The primary reason for undercasting involves using the wrong inputs. For example, when estimating the net income of a company for next year, you may undercast the amount if you overestimate costs or underestimate sales. You may have expected sales to be $5 million and costs to be $3 million. This forecasts a net income of $2 million. If actual net income was $2.5 million, you would have undercast the income by $500,000.
Further Reading
- Keynes, capital mobility and the crisis of embedded liberalism – www.tandfonline.com [PDF]
- Measuring Abnormal Performance in Event Studies: An Application with Bonus Issue Announcements in Colombo Stock Exchange (CSE) – papers.ssrn.com [PDF]
- THE IMPACT OF THE USE OF COMPUTERISED ACCOUNTING SYSTEMS IN FINANCIAL REPORTING – ir.csuc.edu.gh [PDF]
- Socio-economic restructuring and urban poverty under different welfare regimes – books.google.com [PDF]
- West Africa's CO 2 emissions: investigating the economic indicators, forecasting, and proposing pathways to reduce carbon emission levels – link.springer.com [PDF]
